Navigating Value-Based Care in 2025: Three Challenges Ahead

The stakes are high in healthcare with rising demands for transparency and quality, challenging the traditional fee-for-service (FFS) model like never before. This environment is ripe with opportunities to deliver value-based care (VBC).

For nearly two decades, healthcare systems have shifted from FFS to VBC, aiming to reduce costs while improving patient health. This transition is driven by the need to address the shortcomings of FFS, which often result in fragmented care, higher costs, and limited accountability for patient outcomes.

In a value-based care model, providers are rewarded for delivering better care, reducing unnecessary services, and achieving better patient outcomes. Yet, transitioning to a VBC approach comes with challenges.

Where We’ve Been in the Shift to Value-Based Care

The Centers for Medicare & Medicaid Services (CMS) has been a key driver of this shift through the promotion of Advanced Alternative Payment Models (APMs), which link payment incentives to performance. Over the years, healthcare organizations have progressed under these models, which reward hospitals and healthcare providers for the value they deliver.

Today, most organizations function within hybrid payment models—a transitional space that combines capitated payment models with value-based contracts in alternative payment approaches, such as Shared Savings and Downside Risk agreements.

CMS pushed for all providers to take some downside financial risk by 2025, and states have increasingly followed suit by implementing VBC payment models. Adapting to VBC is an economic imperative.

Indeed, the era of simply billing for services rendered is giving way to a more nuanced approach where outcomes and patient satisfaction take center stage. This transition poses both challenges and opportunities for healthcare organizations across the nation.

The Challenges Ahead: 2025 and Beyond

As providers navigate the complexities of risk-sharing arrangements and performance metrics, they must simultaneously enhance care quality while curbing costs—a balancing act that requires innovative thinking, flexible strategies, and robust data analytics.

For those who embrace value-based care to control costs and improve care quality, there is potential for improved patient outcomes and sustainable financial health in an increasingly competitive and heavily regulated environment.

To progress beyond a hybrid system and fully embrace VBC payment models, healthcare organizations must address three critical challenges:

• Data Integration: Seamless, real-time access to clinical, financial, and operational data is essential for informed decision-making and performance tracking. Without fully integrated data, organizations will struggle to balance FFS demands with the quality and cost-saving goals required for VBC success.
• Financial Risk Management: As risk-based agreements become more common, healthcare organizations need tools to predict costs, manage population health data, and intervene early with high-risk patients to prevent costly health events. Navigating these financial risks effectively is critical for thriving in value-based models.
• Patient Engagement: Empowering patients in their care is essential for achieving positive outcomes in value-based care environments. To that end, addressing social determinants of health (SDoH) and maintaining patient involvement through     tailored, automated supports can improve long-term outcomes and mitigate provider burnout.

1. Navigating the Hybrid Payment Model: Balancing Fee-for-Service and Value-Based Care Using Data

In 2024, healthcare organizations continued operating within hybrid payment models, balancing traditional FFS reimbursements and VBC contracts. This dual structure demands that organizations manage volume-based incentives while meeting the outcomes-based goals of performance-based contracts.

Meanwhile, the implementation of hybrid payment models in healthcare has added layers of complexity to financial and operational decision-making, especially concerning the distribution of resources and the provision of care. It requires providers to measure performance on a continuous basis, such as how they’ve reduced spending, improved outcomes for specific patient populations, and met and improved outcomes against Medicare benchmarks.

To make informed decisions in this setting, healthcare providers need access to robust evidence and timely data integration of clinical, financial, and operational metrics.

A next-generation data and analytics ecosystem can form the foundation for this integration, providing a unified platform that tracks performance across FFS and VBC models. By analyzing integrated data, providers can make better-informed decisions about patient care, identify cost-saving opportunities, and optimize care delivery.

For example, the Innovative Healthcare Collaborative of Indiana (IHCI) faced delays in accessing critical data, which hindered its ability to balance care delivery with financial performance. After adopting a solution to integrate timely data from multiple sources, IHCI observed a $28.3 million reduction in costs, improved inpatient utilization, and reduced readmissions within a single year. 

2. Building a Population Health Management Toolbox to Enhance Value-Based Care

As healthcare organizations progress further along the VBC continuum, their ability to manage population health is critical. Success in VBC requires a comprehensive approach that allows providers to improve patient outcomes at large while controlling costs—two central goals of risk-based agreements and value-based care arrangements.

Reliable analytics can support population health goals by:

• Enabling providers to segment  patient populations based on risk to identify individuals more likely to experience costly health events. By proactively managing these patient groups through early interventions, providers can prevent complications that lead to hospitalization, reducing the need for expensive testing and the strain on clinical teams.
• Integrating  real-time clinical, claims, and financial data to allow organizations to continuously monitor performance against spending, claims reimbursements, and payments from CMS. Leaders must track costs and quickly identify areas for improvement and savings opportunities. Robust analytics enable administrators and healthcare providers to report quality outcomes more effectively and avoid penalties.

Carle Health successfully used population health management tools to curb financial risks. By identifying high-risk patients early and implementing personalized care plans, Carle Health reduced unnecessary spending and improved patient outcomes while maximizing shared savings under their VBC contracts.

3. Enhancing Patient Involvement to Improve Health Outcomes and Tackle SDoH

In value-based care, patient engagement and satisfaction are also central to improving health outcomes and achieving cost efficiency. Providers need tools that not only engage patients but also help address SDoH—factors such as housing, transportation, and food security—which can significantly impact a patient’s ability to adhere to their care plans.

Automated, multi-channel communication pathways driven by augmented intelligence allow patients to stay engaged with their care teams and navigate SDoH-related obstacles. Such tools can send tailored messages to patients, including appointment and prescription refill reminders. They also collect patient-reported outcomes through secure text messages. This helps care teams monitor patient progress and intervene if complications arise.

For instance, a large health system’s orthopedic surgery department leveraged automation to enhance patient engagement before and after joint replacement surgery. Patients received regular messages with pre-surgical preparation information, post-surgical recovery instructions, and pain management tips. Thanks to these automated messages, the health system saw a 44 percent reduction in hospital readmissions and a significant decrease in length of stay, as patients were better equipped to manage their recovery from home.

Moving Forward in Value-Based Care

As healthcare organizations advance in their VBC journey, their ability to harness comprehensive data, manage financial risk, and effectively engage patients will define their success.

Organizations that leverage the appropriate data and analytics solutions are well-positioned to thrive in the evolving landscape of value-based care, delivering better care while achieving positive margins and increasing profitability.

Ready to tackle your VBC challenges? Speak to one of our highly qualified specialists and request a product demo today!‍

Additional Reading

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